Archive for May 2010

Got a mail a while ago asking my views on branding fruit and vegetables. What I wrote may interest a wider audience. Hence this post – actually extract from my mail to ….

“A brand as I understand the word – is a distinguishing name and/or symbol (such as logo, trademark, or package design) intended to identify the goods or services of either seller or a group of sellers, and to differentiate those goods and services from those of competitors.

A brand need to create a distinguishing name, an image..at least a standardized product.

Diversity of the f+v product portfolio and range, with its intra and inter regional, seasonal, varietals and trade variations, and the variables their combination generate throughout the chain, makes the sector mind boggling. One can’t club even the fruits together as a category. Banana is as different from Apples or Citrus. Even within apples, J&K apple is as distinct from HP apple or for that matter Uttarakhand apple.

Even within apples from Himachal, there are sub regions (Kullu, Shimla, Kinnaur) and heights to tackle with in all regions. Lower height – middle height – higher height. Different heights – different quality. Now come to Kashmir apple. (excuse me Mr. Abdullah for telling the truth). No two lots in a truck (10 MT) match. A truck can have 10 to 60 lots. Within a lot no two boxes match. Within a box no two layers match. Even within a layer no two apples match. Go further down from farm to plate, variables keep on piling.

Under these circumstances, with is no product standardization, can one create a distinguishing product, a brand? Branding. Not yet in my view. Branding f&v is a chimera, a mirage, a faraway milestone – at least in India as of now.

Hope this helps. Know it will not but can’t help but tell the truth.’”

Greece has suddenly become famous and important. Following musings culled from a fairly recent study compiled by ‘International Food and Agribusiness Management Association’ might offer some lessons for fruit and vegetable retail anywhere.

Looking at expenses in f+v retail, the biggest cost is the purchase of goods bought for resale. This cost is highest at 82.9% in Greece. Expenses for wages and salaries also vary widely between countries. This expense is on a very lower side, a mere 3.4% in Greece. Other expense (which includes rents or lease payments) is also lowest in Greece at 5.6%. Overall, total expenses amount to between 92.0% of operating income. Consequently, Gross margins are just 17.1 % and operating profit margin is 8% of operating income. The apparent gross profit (in monetary unit) per shop earned is also lowest in Greece.

Now juxtapose above information with other fact that Greece has one of the highest densities in the world for f+v exclusive shops and the number of shops is still increasing. Lower gross margin (17.1%) can probably be explained by the higher F&V shop density in Greece, which results in higher competition and thus reduced pricing power for shop owners but increasing the bargaining power of suppliers. This perhaps explains high cost of purchase of goods – too many shops competing for same goods.

From a con­sumer’s point of view, however, such the Greek situation may be ideal – many shops and low prices, which may partly contribute to the high per capita F&V consumption rate in Greece, which was one of the highest as per 2003 (the most recent available year) FAOSTAT consumption data across the world.

It has been strongly argued that there may be a link between a country’s retail system and its f+v consumption level. Greece demonstrates that. The more highly differentiated the supply structure of F&V, the easier it will be to consume them, provided no other constraints such as low incomes or high prices exist.